In a previous blog post, I described a corporation’s Certificate of Incorporation of as "the foundation upon which a corporation is built."
If the Certificate of Incorporation (also known as a "charter") is the foundation of a corporation, the corporate bylaws are the structure built upon that base.
While the Certificate of Incorporation provides for the general features of a corporation (though the Certificate of Incorporation may vary in length and complexity) and is filed with the state, the corporation’s bylaws are not filed on the public record.
Corprate bylaws provide the granular detail into how the corporation will operate and what its governance mechanics will be. They also describe the relationship among its Board of Directors, its officers and its shareholders.
The contents of a corporation’s bylaws may vary, depending upon which provisions the initial Directors wish to include, and can be amended by a majority vote of both the Board of Directors and stockholders at any time in the future.
Delaware’s corporate law provides for this flexibility, stating:
"[A corporation's] bylaws may contain any provision, not inconsistent with law or with the certificate of incorporation, relating to the business of the corporation, the conduct of its affairs, and its rights or powers or the rights or powers of its stockholders, directors, officers or employees[.]"
Please feel free to utilize this free corporate bylaws template.
Bylaws and the Board of Directors:
A corporation's bylaws may often provide for terms governing the creation, structure and operation of its Board of Directors including, without limitation:
The scope of indemnification of Directors and advancement of expenses in the event of litigation (though many corporations supplement Directors’ rights of indemnification with separate contractual agreements).
Bylaws and Officer Positions
In addition, bylaws often set forth the titles of officers that will operate the day-to-day activities of the corporation (e.g., president, vice president, secretary).
These provisions may also provide a broad description of the officers’ respective responsibilities and the means by which an officer can be replaced or new classes of officers can be created.
In addition, among other things, the bylaws will detail the terms and conditions under which officers will be indemnified for actions taken in the role with the corporation.
Bylaws and Shareholder Matters
The bylaws often contain a number of provisions governing shareholder voting and activities, including, without limitation:
Amendment of the Bylaws
Unlike the amendments of a Certificate of Incorporation, which are subject to specific requirements under Delaware law, a corporation's bylaws may provide for amendment by the Board of Directors, by the shareholders or by both.
Corporate bylaws are extremely important in the ongoing operation of a corporation, but the precise provisions of corporate bylaws can vary. Delaware law seeks to provide a level of flexibility in the operations and internal organization of a corporation, within certain parameters.